Archive for the 'economy' Category

What’s It Like At Your Place?

Sharon April 27th, 2008

My readers have been so great about reporting shortages and prices, I thought I’d expand this and start a discussion of what things look like in your neck of the woods, and through your budget.  How are you all doing making ends meet?  How are rising food and energy prices affecting your household?  What are you most concerned about?  What are you seeing when you go the store?  I admit, I’m curious to hear more about what this looks like through the eyes of more people.

Today’s New York Times reports that people are changing their dietary habits in response to the recession, buying cheaper food, cutting back on some luxury items and cutting red meat from their budget.  I have to admit, the last quote in this section struck me - this is, after all, the New York Times. 

Home prices are sliding, wages are stagnant, job losses are growing and the Standard & Poor’s 500-stock index, a broad measure of stock performance, is down 6 percent in the last year. So consumers are going on a recession diet.

Burt Flickinger, a longtime retail consultant, said the last time he saw such significant changes in consumer buying patterns was the late 1970s, when runaway inflation prompted Americans to “switch from red meat to pork to poultry to pasta — then to peanut butter and jelly.”

It hasn’t gotten to human food mixed with pet food yet,” he said, “but it is certainly headed in that direction.”

So how does this look to you?  To your friends and family?

 Our region is one of the few that hasn’t had a major downturn in housing prices - the greater Albany area has slow sales but is still hanging tough.  Still, we were finally able to get the house reassessed after a ridiculously high assessment (redone after Eric’s grandparents moved in near the peak of the market), and will see our property taxes drop by 30%.  We’re actually benefitting from everyone else’s suffering, and so are some elderly neighbors.   It is tough on others as well - one of our neighbors lost her husband recently and wants to sell the house, but can’t.

The other big savings has been getting rid of the van.  We’ll save nearly a 1000 keeping it on the road.  Cramming in the little car is quite uncomfortable, but then again, having riding in the car be a bit uncomfortable isn’t bad for us.  Someone asked what we were driving - it is a 1993 Ford Taurus - we inherited it from Eric’s grandmother and it has been our commuting car ever since.  We can put 2 boosters and a carseat side by side in the back. 

We’ve definitely slowed our stock up rate, and at this point are just trying to maintain on everything (we’re actually letting our rice supplies slide a bit).  But we’re rapidly approaching our six months of grocery-store free time, where we live primarily off our own home produce.  Even better, the goats will arrive in July and we’ll be able to cut back on milk runs to the local farmstand.  Meanwhile, we’re getting the property into order - fixing the leaky roof (grrrr…we had it replaced 3 years ago and the $&#@*! who did it did a bad job), replacing attic insulation, putting drainage on the back field so we can expand the gardens that way, building more raised beds close to the house, setting up fencing for goats and sheep.  The hoophouse is going up this year, come hell or high water - I’m determined to produce all of our greens over the winter.  If we can afford it, I might even put up two, and start a winter CSA this year.

 We’re betting on the fact that as the New York State budget collapses, Eric, who isn’t tenured (intentionally so) and is much cheaper than tenure track faculty with similar qualifications, will probably keep his job, even if he’s stuck with more courses.  Last recession, they encouraged older profs to retire, had a hiring freeze and added more adjuncts rather than tenure track faculty, so we think Eric’s status may serve him well.  We’ve got dentist appointments for everyone and tetanus boosters for us planned, since we won’t be shocked to see benefits cut at some point.  Definitely working on *staying* healthy.

 I’m going to intensify my efforts to find birthday and holiday presents at yard sales, so that we aren’t buying much of anything new.  Also Eli’s feet jumped three sizes this year, and since he is drawn to mud puddles the way metal is drawn to magnets, more bigger shoes are on the list.   I figure at some point, things will get so expensive people stop using things lightly and discarding them so easily - so might as well look a little further ahead and pick up clothes a couple more sizes up.

We’re going to suck it up and fill the oil tank (which runs backup heat to keep the pipes from freezing when we’re out of town and the hot water heater) this spring, since I don’t think the price will be any lower in the fall.  We’re already splitting and hauling wood for winter.  May will be a tight month, given the price of oil.  But a tank full should, at our present rate of use, last us two years, so better do it now.

I’ve upped my plans for growing our own chicken feed and alfalfa hay for the bunnies and goats.  Feed prices are way up.  Not a lot of ways we can cut our food budget, except by producing our own milk and perhaps by giving up some seasonal fruits we really like and don’t grow enough of.  If we had to, we would.  For now, it is worth keeping them.  I’m already canning rhubarb and drying nettles and dandelions.

We’re going to start a homeschooling coop with two neighbors, to cut back on everyone’s trips to various activities.  And we’ll do all our swimming one day a week, to cut back on trips to the pool at the next town over. 

I’ve decided not to sell eggs this year - I have noticed in the last few years that the things we give as gifts sometimes profit us more than what we sell, so I decided that this year, we’d give the extra eggs away - to the food pantry, to neighbors, Eric takes them to work and hands them out.   

So far, things haven’t really penetrated hard into our lives - we’re lucky - and we’re reaping the fruits of a long time of being called nutcases ;-).  But I don’t expect it to stay that way for the longer term.  How are you doing?

 Sharon

The Bad, the Worse and the Seriously Ugly

Sharon April 11th, 2008

I have to apologize for the title - I know most of my readers come here for the cheery, uplifting approach that I have, and that the above is a bit of a shock.  I did seriously consider titling this post “Cute Bunnies, Kittens and the Sunshine on my Shoulder” but it seemed too cruel to make you start there and head straight into the bad news on climate change.

Remember climate change?  It isn’t just this blog that has gotten a little bit quieter on this subject lately because there’s so much other, related bad news - I’ve definitely noticed a move from the front pages to the back ones as the economy and the food situation displace climate change as the worst crappy thing going on in the world.  Remember, we can’t take the human interest stories off the front pages - those sell papers.  So there has to be a heirarchy of the awful.  

And it  isn’t that we all don’t care a lot about climate change, of course.  It is just that when the bank is talking about foreclosing and we have to run down and sign up for food stamps, sea level rises at the end of the century look a lot less serious. 

This is, of course, both inevitable and a potential disaster.  Poverty has the potential to reduce our carbon emissions in some respects, and increase them in others.  James Hansen’s recent analysis of the fossil fuels situation, which notes that oil and natural gas alone can’t get us much past 450 ppm of Carbon (although Hansen’s other recent work has emphasized the absolute necessity of getting back to 350ppm - we’re past that already) , but coal can.  But to imagine us leaving the coal in the ground, we haev to imagine a level of self-restraint we haven’t managed when we were rich and flush with energy - it seems difficult for me to imagine that we’re going to be ok with rising electric prices constraining our usage when we’re already struggling.

Which brings me to a list of Unpleasant Truths about how climate change, our response and adaptation are likely to proceed.  Unfortuanately, I could find no pleasant truths to go along with it.  I really wish there were some.

 1. As we get poorer and the economy tanks, it is going to be harder and harder to muster the time, energy, enthusiasm and above all *money* for climate change mitigation projects.  That’s not to say that we might not see some or even many major public works projects.  But right now, our economy is stretched.  With the total cost of the war in Iraq looking to be 4-5 trillion and our ability to borrow from other nations headed into a serious decline,  along with the municipal investments of many towns and cities, our ability to do large scale adaptations is in serious trouble.  The price of energy is also steadily limiting our ability to do a build out.  Absolute shortages of diesel fuel may at some point may create further constraints. 

Officially, we exceeded the May 2005 oil and liquids production peak in January 2008 - which means we’re producing more oil, right?  Ummm…yeah…a big old 0.23%.  Oh, and EIA estimates of production are often revised downward more than that.  Oh, and we didn’t actually produce more conventional crude *oil* - we just produced more “liquids” which is a little different.  There’s a full discussion over here at The Oil Drum.  But the point is that there’s no reason to be getting excited - and demand is growing far faster than supply, which is essentially flat.  We’re in energy trouble.

Meanwhile, we’ve maintained the economy essentially by borrowing from the future a host of ways, among them our failure to maintain our existing infrastructure - estimates suggest that keep the water coming out of pipes and the bridges from falling on people would cost 1.5 trillion additional dollars.  And since the Fed is relentlessly nationalizing the losses of corporations at our expense, it does not take a genius to guess that trillions for a new energy infrastructure and retrofit will be discussed, the possibilities glowingly described, and most of the money won’t emerge unless the economy gets fixed.

2. Reports of a new green economy, and the ability to continue growth have been radically overstated.  People like Alex Steffen and Colin at NoImpactMan (both of whom I think are totally terrific, if not correct on this issue) have argued that we can still have plenty of economic growth and a brand shiny new economy based on renewable energies.  But a closer look at the evidence for this suggests otherwise.  For example, both refer to this site, to reassure us that it won’t cost us anything economically to switch to renewables and use less.  But besides the fact that the underlying assumptions that allow them to perform their calculations aren’t transparent on this site, the maximum imaginable reduction over business as usual emission is 40%.  But 40% not only won’t get us to 350ppm, it won’t keep us below 450, or even 550 over time.  In fact, a University of Victoria study found that the only thing that kept us below 450 was a 100% reduction of industrial emissions, and in fairly short order.  And that is a wholly different animal economically speaking, particularly given constraints on our ability to retrofit and build out new resources.

 The US economy is driven heavily by consumer spending - and the emissions for consumer goods, shipping, shopping, etc… constitute nearly 1/4 of all emissions.  Cut those emissions, and you also cut the driving force of the economy.  A steady-state economy may be possible, but it isn’t easy - even those who advocate it admit that the idea is pretty hypothetical. 

Moreover, fossil fuels have driven the economy as powerfully as they have in large part because their EROEI was so great - they are roughly the equivalent of an extremely high return investment.  The dividends on the oil you use to extract it are huge.  On the other hand, the EROEI of most renewables is fairly low (wind is something of an exception), and will never be cheap.  So more and more of our economic costs get eaten up in expenses, and it is harder and harder to keep the economy afloat.

3. Aren’t just getting poorer now, we’ve been getting poorer for a long time - it just started moving faster. The most recent poll on this subject just matches up with what we all  knew - real wages have been declining for decades, benefits have been reduced, expenses are rising, people are going into debt to maintain and wealth is getting concentrated in the hands of already wealthy people.  What does this have to do with climate change?  Well, a lot, actually.  For example, most incentive strategies for adaptation are directed at homeowners who pay out taxes.  You get them as tax rebates - but most poor people don’t pay taxes, and most people who may be foreclosed, or want to walk away from their houses don’t feel any great incentive to superinsulate them.  And our sheer level of indebtedness means that any major problem in the system is likely to bring people down fast - they simply don’t have any more cushions of credit to fall back on.

Major town and municipal infrastructure investments depend on the property tax rate - and if your town is like mine, a lot of new downward assessments are coming.  As towns start having trouble keeping the buses running and the plows going, I would expect the suggestion that the local community center go solar to rank right up there with the all-Mercedes police car proposal. 

 The psychology of poverty is probably, though, the most important thing.  People who are in or on the verge of crisis just want to maintain and get along.  They can see themselves falling into an immediate abyss, and they don’t care very much about the next terrible thing. 

 4. Matt Savinar’s axiom “We’re spending billions to fix problems we’re spending trillions to create” is right on the money here.  It is easy to get impressed by our new commitment.  It is important we look at the amount of money we’re throwing at creating and continuing the problem - and that we look carefully at how much of that money is coming from us.  Colin over at NoImpactMan has a nice rant about the evils of the political destruction of congestion pricing in New York City.  He’s totally on the money.  But that is the point - it isn’t that congestion pricing couldn’t pass, but not only do many of the people who oppose congestion pricing drive into the city and thus fund the opposition, but I’m willing to lay odds that  many of the same people who in principle agree that this is a good idea are giving money to parking lots and garages when they travel into NYC on business.  And that money is going to stop congestion pricing.  

The reality is that most of us, no matter how carefully we try to minimize our impact, are collectively funding the opposition efforts.  We’re still buying gas, even as the oil companies are working against us.  We’re still buying food at the grocery store - even me sometimes. 

The things that need to happen to mitigate climate change are huge - a cessation of the mantra of growth, for example, or the end to the biofuels boom - and the force of opposition to making them happen doesn’t just lie in the evil corporate headquarters of GE or Monsanto, it lies in all of us, who go out and make our money in the existing economy, and put our water filters on our credit cards.  The reality is that we are working much harder at making the problem worse than we are at fixing it.

5. We just did our build out, and it is not going to serve us well.   Take a look at this article on slum housing - and the future of the mass build out we just engaged in.  I think it articulates really well the problems we face, and I’m quoting it at some length because I think this is so important (btw, Mike Davis’s Planet of Slums is a terrific book):

“Let’s now turn to the U.S., which has seen a similar ballooning of urban and core-suburban value. Despite the obvious need for alternative sources of energy and technology which reduces petroleum consumption, how much global and American capital flowed into these investments for the future (recall the slogan, “energy independence is national security”) in the U.S., compared to the trillions pumped into mostly urban real estate?

I haven’t been able to find adequate statistics on these investment flows, but it seems the “investment” in urban-suburban real estate is on the order of 100 times the total capital invested in alternative energy research and development.

How many jobs flow from those thousands of granite countertops and fake “Gone with the Wind” staircases in thousands of McMansions and urban condos, and from the hundreds of strip malls constructed in the past decade? None.

Yes, someone was paid to manufacture and install the construction materials, but now that the building is done, there is nothing to show for those trillions of dollars of investment. Just like the Third World mega-slums, America’s cities and suburbs are now “capital traps” of national savings.

For it isn’t just the capital trapped in empty condo towers and millions (yes, millions, see yesterday’s entry sources) of empty houses and the rapidly enptying office parks and malls–it’s also all the capital trapped in the financial institutions which enabled the real estate bubble to expand so voraciously and profitably that all other investments paled.

It’s no secret that financial firms’ profits have grown to the point that they dominate the S&P 500. Trillions of capital are tied up in U.S. real estate and the mortgage-backed securities and other asset-based financial instruments based on residential and commercial real estate.

What could the nation have gained had those trillions been invested in new production of goods and services? Was the entire real estate bubble a vast, perniciously destructive misallocation of national savings into “capital traps”? I think the answer is clearly “yes.” Now that real estate is starting its long decline from euphoric fantasy to reality, plummeting values of both the real property and the financial house of cards erected on the property are erasing trillions.

How do you extract the capital from a rapidly depreciating asset? It’s human nature to hope “things will turn around next year.” Unfortunately, real estate will not turn around next year, or the year after that or the year after that. Real estate has become a capital sink for the national savings.

This is the clearest exposition I’ve seen of the problem of imagining a renewable build out - we’ve thrown our money away on an infrastructure that is not going to serve us in any way in the future.  Kunstler’s claim that this was the greatest misallocation of resources in history is probably correct. 

 That said, however, I’m more sanguine than Kunstler that we can make something out of some large chunks of our suburban infrastructure - I’m much less hopeful for the Condos in Miami and Vegas.  The suburban infrastructure can, at least, grow food.  But the sheer scale of the problem of adapting an infrastructure made entirely for cheap oil with decreasing amount of energy and money is going to, a minimum, push our creativity.

One corrollary of this point is that we have millions of unoccupied homes and millions of square feet of unoccupied office space.  Anyone who starts any mitigation discussion with the words “build new housing” is out of their freakin’ minds.  We’re going to be living in those houses, so retrofit is the word of the day.  It may have been a wild misallocation of resources, but we simply don’t have enough resources left to throw away what we have.

 6.  The bad news about climate change is that it is growing worse faster than anyone - especially the politicians - can keep up with.  For example, areas of the ocean are warming up to four times faster than the most radical predictions.   This is non-trivial for a host of reasons, one of them be the accelleration of the collapse of fish stocks, but more importantly, the oceans are the single largest carbon absorber we have right now - and the warmer it gets, the less able it is to keep absorbing carbon - that is, the warmer the planet gets, the faster you have run to keep in place.  We are now, at best, at the point where we can perhaps avoid the very worst outcomes (that does not mean it will not be truly terrible) if we make “draconian” as Hansen puts it - changes very rapidly.  But we are very close to the point at which very little can be done - on at least one level - at all.  In fact, it is possible we are past that point - although we cannot live our lives as though that is true.

Does that mean that emissions cuts are pointless?  No, they aren’t - the difference between 3 or 4 degrees of warming and 6 are enormous - the difference between living in a vastly changed and deadly world versus a visit to hell.  In fact, it is more and more urgent that we do all we can - and that we do it FAST, before what we do stops mattering entirely.  But that means we have to understand what is going on, transmit that information *AND* (perhaps most difficult), we have to stop picking outside numbers, and start using the precautionary principle, which says that instead of waiting for some perfect certainty in the data that may or may not come in time, we now must work under the assumption that everything is more serious than we know it to be. 

To say the least, getting there will be difficult, if it is even possible.

7. Estimates of the cost of addressing global warming like the Stern report are overwhelmingly based upon old data, older estimates of how Global Warming will work, and other outdated analyses.  And they assume that we are still early on in the GW process - which doesn’t look to be the case.  We can expect climate change to eat up an increasing portion of the GDP every year - that is, every year, we’re going to have to run faster financially just to keep up.

Take the example of the city of Barcelona, which now will have to import water by ship to deal with its extended drought.  The thing is, no city or region or nation is ready for these kinds of disasters to happen over and over and over again.  As Gilda Radner used to say, “It is always something.”  Well, we’re entering the world of “it is always something” - and there will always be a better use for our dollars and energies and times than to deal with climate change - until it is too late.

8. Turning the ship around ain’t going to happen.  Global emissions have been rising - the good news is that it looks like in 2008, the stunning rate of increase (something no report accounted for) in demand may slow down a little.  But that doesn’t mean that the emissions levels are falling - that just means we’re not raising them up quite as fast. Yes, higher energy prices will probably drive us to cut back on our driving - and they will probably also drive people to accept coal plants. 

So is there any hope here?  Yes, I think there is, but I’m increasingly finding myself agreeing with Thomas Homer-Dixon in _The Upside of Down_ where he points out that a collapse isn’t actually the worst possible outcome in some cases.

The thing is, the problem with having a lot of money and high technology is that you can’t not use it.  People get weird - they start saying “but we’ve got nano-technology just sitting there.”  They develop conspiracy theories.  And the comfy and entitled get bitchy when they have to give up priveleges.

The thing about a global depression and major collapse of wealth is that it might actually save us from ourselves.  There is no way to turn the ship around - but there is a way to get the hell off the ship and start looking for safe harbors in the lifeboats - by letting the damn thing go down.  Climate change is a bigger threat to us than hard times - and I’m not minimizing the potential suffering created by a world depression.  But I don’t think there’s any way to stop it except this - make most of us too poor to burn our full share.

Ok, I could use some kittens and puppies right now.

 Sharon

Seven Fat Cows, Seven Thin Cows: Hoarding and Storing the Seeds of Deliverance

Sharon April 6th, 2008

Most of us raised in a Biblical religion have some vague memory of the story of Joseph and his brothers, if only from the Donny Osmond musical.   Genesis 39-47 will refresh your memory if you are interested in the details.  In the story, Joseph who was sold into Egypt becomes the powerful advisor of Pharoah, who is having bad dreams.  In one of the dreams, Pharoah dreams of seven fat cows, devoured by seven starving cows.  In the second, seven ripe, healthy sheaves of wheat are devoured by seven shrivelled, dry ones.  Joseph correctly predicts that this means,

“Immediately ahead are seven years of great abundance in all the land of Egypt.  After them will come seven years of famine and all the abundance in the land of Egypt will be forgotten.  As the land is ravaged by famine, no trace of the abundance will be left in the land…And let Pharoah take steps to appoint overseers over the land, and organize by taking a fifth part of the land’s produce in the seven years of plenty.  Let all the food of those good years that are coming be gathered and let the grian be collected under Pharoah’s authority as food to be stored in cities.  Let that food be a reserve for the land for the seven years of famine which will come upon the land of Egypt, so that the land may not perish in the famine.”

Joseph’s understanding and forethought enable Egyptians, and ultimately his own family to survive the famine, in which “…there was no bread in all the world.“ 

One of the fascinating things about the way that this story is told is the linguistic linking of land and people here - that is, we are told that we should store food so that “the land may not perish.”  Of course, this means the people of the land, but it also is a reminder that famine is enormously destructive to the land itself - in the face of famine, land that should not be cultivated is brought into cultivation (we are seeing this already in the US as Crop Protection Land is brought into production and elsewhere as the world’s poor are pressed onto increasingly marginal land), and desperately hungry people will eat whatever they can, including protected animals and plants.  Famine isn’t just destructive to the hungry, but to the earth they devastate in the quest for food.  In a real sense, the preservation of the people can be the preservation of the land itself.

Whatever anyone can say about Pharoahs ;-), this one seems to have a laudible sense of obligation to his own populace - a sense of obligation that wildly exceeds the leaders of many nations, who have allowed stockpiles to collapse in times of comparative prosperity.  Right now world grain reserves are well below what is considered to be a “safe” level to keep populations fed in a time of shortage - and this can be seen by the concern that nations are showing about expanding and safeguarding what reserves they do have in the present crisis.  For example, Thailand recently announced it will not consider selling grain from its stockpiles, and the Philippines negotiated a deal with the US and Vietnam to buy a large reserve.

I bring this up not to make you feel like you are back in Sunday school, but because of a Washington Post article I just read, which struck me because while it is perfectly possible that this is an accident, what purports to be a news story about fears of unrest caused by high grain prices, particularly rice, turns out to have what looks like a strong propaganda component, warning people about the danger of stockpiling grain. 

Cambodian Finance Minister Keat Chhon last week called for people to be calm. He urged them “not to stock up on foods, which could make the situation even harder.”

Some experts say that building reserves to protect against future shortages only makes the problem worse.

‘Of course, if every country, or individual consumer, acts the same way, the hoarding causes a panic and extreme shortage in markets, leading to rapidly rising prices,” said Peter Timmer, a visiting professor at Stanford University’s program on food security and the environment.

For example, he said, “the newly elected populist government in Thailand did not want consumer prices for rice to go up, so they started talking about export restrictions from Thailand, the world’s largest rice exporter. . . . So last Friday, rice prices in Thailand jumped $75 per metric ton. This is the stuff of panics.” “

Now there is some real truth here - if billions of people attempt to build up a food reserve in a time of short supplies, they will make the situation worse, driving up prices and increasing shortages.  It is also true, however, that the root cause of these shortages is not people trying to buy now so that they can be sure that they will have rice to eat if the price continues to jump (it went up by 10% on Friday alone).  The problem is a combination of climate change, aquifer depletion (especially in China) and biofuels growth - with a heavy emphasis on that last one.  

Now the difference between hoarding and stockpiling is this - once you are already in a crisis AND there is a meaningful and rational system for ensuring people have access to food, building up stores can disrupt the existing system and its fairness.  This is hoarding, and it is problematic.  That is, if there’s just enough rice to around, *and it is going around in a fairly just way*  those who are wealthy enough to build up private stocks can disrupt the system, and shouldn’t.  That, however is not the case now.  First of all, there’s more than enough food to go around, and second of all, justice has not been the major concern.

How do we know this?  Well, in 2007, the world produced enough calories to feed everyone in the world half again more calories in grain than they need.  With 6.6 billion people, we could feed 1/3 more people, raising the world’s population up to 10 million on present agricultural yields of grain alone - this excludes all vegetables, fruits, grass fed meats and forageable plants.   That is, right now we are not experiencing shortages of food in any absolute sense.

This, I think is a deeply important point.  When I observe things like this, people usually not that there is no such thing as perfectly fair food distribution, and that is, of course true. It is also true that we are so far away from even a remotely just system of distribution that if we could even approximate a level of concern for the world’s populace that exeeded our concern for our cars, I’d be happy.  The reality is that rich people eat three times - they eat some grain.  Then they eat meat, fed on enough grain to feed an ordinary person many times over, and then they feed their cars, their pets, the birds and occasionally burn some grain and legumes in their stoves.  We entirely lack a system that simply says “humans get the first products of agricultural labor” - that is, that people outrank the cars, dogs, and desire for steak of the average rich world denizen. 

Building up supplies in times of comparative prosperity and surplus is not hoarding - it is simply a wise idea, and has been since Pharoah and Joseph were doing it.  Keeping a solid reserve of food means that you are not as vulnerable to disruptions and crises.  But national stockpiles have been falling steadily for the last decade, with world reserves presently at their lowest since records have been kept.  Just as we’re not saving money any more, we are not presently reserving our staple foods for hard times.   

Not only is building supplies in times of comparative prosperity morally ok, it is not ethically speaking hoarding if there is no system of equitable distribution.  That is, hoarding is the retention of food stores *when things are being distributed fairly* that disrupts an already fair system.  Hoarding is not an accurate way to describe the attempt of desperately poor and hungry people to make sure that they are a little less desperately poor and hungry next week, nor is stockpiling an unreasonable response to a crisis in which there is no just system of making sure that the hungry are fed.  In that case, when governments and larger institutions are not ensuring fair distribution, it is more than reasonable for people to try and make sure they and theirs are fed.  Can this cause problems?  Absolutely.  Is this root cause of present problems, and should those who inadvertantly exacerbate problems with deeper root causes be held up as responsible?  Hell no. 

There are some food sources, notably rice, that are experiencing absolute food shortages.  But food in general is plentiful - so what’s the problem?  Well, Lester Brown announced yesterday that the total amount of US biofuels production could have fed *250 million* people every bite of grain they needed for a year.  Think hard about that fact next time you are in the market for some E10.   Note, however, that the UN and World Bank, both primary enthusiasts of the world biofuels boom, are arguing that we should give more money to the World Food Program (and we should - they are already desperate and things are only going to get worse), but not that we should stop biofuel production.   The one bright spot in what is otherwise a humanitarian and ecological disaster is that Germany seems finally ready to slow the madness - it announced earlier this week that it would remove its own ethanol mandate.  Here’s hoping that that’s the first in a trend!

This is, I think, an important point because articles like the one I cited above suggest that a great deal more of the responsibility rests on poor rice consumers than is just.  Years of being taught to read closely makes me think that the Washington Post article is more than just a piece of reporting - that is, its level of balance on the subject of stockpiling is low - there is no discussion about, for example, how those who bought rice before the price jump are doing in comparison to others, or why government and world reserves are as low as they are - and whether consumers have the right to compensate for absent state stockpiles of staples.  Other than one brief mention of biofuels there is no discussion of rich world hoarding in the form of meat consumption or reduced exports because of biofuels.

The extended discussion of individual hoarding, which takes up nearly half the article, implies that political unrest is primarily caused by governments acknowledging their is a problem, and by people who want to eat trying to continue doing so.  Moreover, while I hate to get all conspiracy-theoryish, I cannot help thinking that such an extended discussion of stockpiling in an article that is supposed to be primarily about political unrest due to food prices (and it isn’t like there isn’t anything to write about on that subject) is also beginning to create an American anti-stockpiling narrative. 

I’ve had several people email me recently about the ethics of building stockpiles during a time of famine.  And I agree, were we really seeing extremely tight supplies of grains, and a system for just distribution, it would be perfectly reasonable to expect to work with it, and limit reserve building right now.  But that is not the case - we are presently seeing a vast excess of grain production - mostly going straight into gas tanks and CAFO meat.  As economist Amartya Sen has observed, famines are usually about access to food, not absolute supply.  Well, for billions of people in the poor world and millions in America can walk into stores filled to overflowing with food - and cannot touch any of it, because they cannot afford it.  It is that experience of hunger in a world of plenty that millions of people are experiencing for the first time now. 

Moreover, the kind of stockpiling most of the people I’m talking about are doing is not only ok, it is great for the development of local food systems.  People are searching out local grain and legume growers, and buying direct, or at worst, buying direct when possible from small scale producers in someone else’s locality.  There are, of course, people who can’t do that - but generally speaking, most of my readers with extra money are essentially investing it in local staple food systems, and that is an extremely good use of money.

Even if you are not able to buy local and organic, you should remember that your use of food is the real purpose of the food - you aren’t buying your grains to feed to feedlot cows, or to burn in your car.  You are buying food to *EAT* it.  Eaters should always have first rights to food. Moreover, those of us who are concerned about the failure of our nations or regions to stockpile food during our fat years have a reason and a responsibility to take on that role for themselves.

The thing is, organizing and keeping grain reserves is one of those “comparatively good uses for government” things.  Thus, moves by nations to stabilize or increase their reserves, while a day late or a dollar short, again, are not the root problem - yes, they are driving short term price rises. But they are also responding, not to an imaginary problem, but to the real danger that people will starve to death and die.  Market analysts who talk about the problem of people holding back food and creating subsidies are ignoring the fact that nations are responding because a substantial portion of their populace is in danger of death from hunger and hunger related disease.

“To calm increasingly concerned Chinese consumers — for whom prices rose 8.7 percent in February from a year earlier, the biggest increase in 12 years — the government froze the prices of some grains, meat and eggs. Premier Wen Jiabao announced this week that China is largely self-sufficient in rice production and has stockpiled 40 to 50 million tons of rice.

The Chinese government also has run picture after picture in local newspapers of its “strategic reserves” of frozen meat, sacks of grain and barrels of cooking oil.”

Today a San Francisco Chronicle editorial argued that “hoarding” only makes things worse for everyone.   In The Times of India, Swaminathan S. Anklesaria argues that “national hoarding” or curbing exports is itself a major problem, and that governments should not try to mitigate hunger by restraining exports.

“The lesson is clear. Curbing exports is a form of national hoarding. If every country tries to hoard food, food prices will naturally rise. Governments would like to believe that hoarding by traders is terrible, whereas hoarding by governments promotes the public interest. But the impact on prices is exactly the same in both cases. Indeed, when governments start to hoard food out of panic, the panic itself stokes further inflationary fears.

That is why I am not optimistic about the Indian government’s anti-inflation package. The government thinks it is improving domestic supplies and hence bringing down prices. In fact the government is adding to the global hoarding problem, and stoking panic too. So, expect food inflation to keep rising in coming months.

When and how will it end? The roots of today’s food inflation are global, and cannot be tackled by the Indian government in isolation. Inflation will come down only when world food production rises, and world prices fall. That cannot happen immediately. “

But implicit in this assumption is the belief that it would be better to let some people starve than to start the cycle of driving up prices, or having governments stabilize them.  This is a form of free market orthodoxy that doesn’t tolerate any dissent - people dropping dead of starvation?  Well, the solution is to let the market handle it, which, of course, it will - in due course.  Pay no attention to the corpses on the side of the road.  Wanting people to eat and worrying they won’t, well, that’s a form of panic!  Crazy, crazy panic.

This orthodoxy  also does not distinguish between forms of national hoarding - storing the food your country produces to feed its population is described as national hoarding - but no such description is given to the production of biofuels, almost always used within nations, to feed the cars of people who are already well fed.  If there is a form of hoarding going on, it can be best seen in ethanol and other grain production - we are hoarding our food for our cars.  We could make the same about meat production - heavy meat consumption results in the removal of potential exports from markets that, in this case, desperately need them.

Worldwide, the costs are already rising in human terms.  The UK Guardian reports:

Cameroon At least 24 people killed and 1,600 people arrested in February. Taxes slashed on food imports and public sector wages increased by 15%.

Indonesia 10,000 demonstrated outside the presidential palace in Jakarta after soya bean prices rose more than 50% in a month and more than 125% over the past year.

Egypt Seven people have died in fights or of exhaustion queuing for subsidised bread. Dairy products are up 20%, oil 40%.

Burkina Faso Riots in three towns after the government promised to control the price of food but failed.

Guinea Five anti-government riots over cost of living in past 18 months.

Pakistan Thousands of troops have been deployed to guard trucks carrying wheat and flour.”

Earlier this week, the World Food Program head reported in Ethiopia that the problem is not absolute shortages, but growing urban hunger, as urban dwellers, pushed off the land by globalized practices of food dumping and now dependent on imported food, can no longer buy it.  African nations that were once nearly food self-sufficient now depend on cheap imports for 40% or more of their food - and there are no more cheap imports.

So should you stop buying food to store?  No.  What you should stop doing, if you haven’t already is this.  Stop eating CAFO meat - period.  Don’t buy any meat that isn’t grassfed and local, and sustainably raised.  Go vegetarian if you can’t get good local meat.  And everyone who has more than they need needs to both redouble their charitable giving and their advocacy against biofuel growth.  But don’t be ashamed of feeding your family, or planning ahead for tight supplies - instead, donate what you can so that someone in Asia or Africa can buy a little extra for their families.  Let the cars worry about whether there will be enough grain in reserve.  If you want to help stop biofuels growth, consider signing this petition and supporting the work of Food First and other groups trying to stop the conversion of human food to car food.

There is a Mishnah (a Rabbinical expansion of a Biblical Story) that says that after Joseph and his brothers were reunited, Jacob and his sons made their way to Egypt where there was food in the famine.  On the way to Egypt, one day, Jacob awakens and tells his sons to get up and plant cedars in the desert.  They ask him why?  And Jacob answers that someday they will come out of Egypt again at the end of some terrible times, and when they do, their descendents will need those cedars.  “So rise up now and plant seeds.  For you are planting on this day the seeds of your own deliverance”

If you want to help in the world food crisis, give what you can, protest biofuels,  and eat lower on the food chain.  And at the same time,  turn your efforts, the work of your hands and heart and time and energy to doing as Jacob and his sons did - planting seeds, the seeds of our own deliverance.  The time is not so far that we will need them.

 Sharon   

Recognizing Parallels When they Slap You In the Face with a Haddock

Sharon March 31st, 2008

Nearly every financial report that discusses how bad the economic situation is going to be reports two facts.  1. Ben Bernanke is a student of the Great Depression, which means we’re safe from making the same mistakes twice.  2. Clearly, we aren’t in the same situation as the Depression, because after all, the situation isn’t the same.  Consider today’s essay in “Fortune” which repeats a mantra I’ve noticed over and over again - remember, things aren’t nearly as bad as in the Great Depression.

“No, Meltzer isn’t saying that a Great Depression - 25% unemployment, social unrest, mass hunger, millions of people’s savings wiped out in bank collapses - is upon us. Nor, for that matter, am I. But the precedent is unsettling, to say the least. You can only imagine how unsettling it is to Federal Reserve chairman Ben Bernanke, a former economics professor who made his academic bones writing about the Great Depression.”

This is supposed to reassure us - and, despite acknowledging the danger,  to point up the radical differences between the Depression period and the present.  And I suspect for some people it works.

The problem is, the parallel is a false one.  The statistics that the commentators are citing are statistics from deep in the middle of the Depression from 1933 when unemployment really was 25%, and they are holding them up against our present situation - at the very beginning of a financial disaster.  Observing that the Great Depression isn’t upon us isn’t very helpful, because at the comparable stage of the Great Depression, those things weren’t upon us either. 

For example, when the stock market crashed in October of 1929, a news report observed that “the vast majority of Americans remain unaffected.” Two months after the stock market crash, Secretary of the Treasury Andrew Mellon said, “I see nothing in the present situation that is either menacing or warrants pessimism.” 

Unemployment did not instantly rise to 25% - in March of 1930, it was 3, 250,000 (and this is some months after the crash).  By 1931, however, a year and a half into the crash, it had doubled to above 7,000.  By 1933 it would double again.  But again, at a parallel point in time, unemployment was comparatively reasonable (high by our present standards, but fairly typical for the period).

Meanwhile, those who were lucky enough to keep their jobs found themsleves at first in a decent position - as Don Lescohier reports in Common’s _History of Labor in the United States_ “The first impact of the Depression of the ‘thirties did not affect the wages structure.  It cut the earning of millions through unemployment and part-time work before it affected wage rates.  It was not until the last quarter of 1930 that appreciable downward changes in manufacturing wages occurred.”  Yet again, the first ripples in the financial centers didn’t actually translate right away.  But by 1932, wages in Ohio had fallen by nearly 60%.

In that sense, the current system may be worse than the Depression - while wages haven’t declined, buying power has declined much more precipitously than it did in a parallel period during the Depression.  For example, in the news today, food stamp use is approaching record highs - that is, while unemployment remains comparatively low and wages are still stable.  This is not a good sign. 

On the other hand, there are parallels we might want to look at.  For example, in Harper’s Magazine in 1933, a lawyer from Mason City, Iowa wrote about the housing bubble that preceeded the collapse,

“Farm prices shot sky high almost over night.  The town barber and the small-town mercahant bought and sold options  until every town square was a real estate exchange.  Bankers and lawyers, doctors and ministers left their offices adn clients and drove pell mell over the country to procure options and contracts upon this farm and that, paying a few hundred dollars down and expecting to sell the rights before the following March brought settlement day.  Not to be in the game marked on as an old fogy, while paper profits were pyramided and Cadillac cars and pleasure trips to the cities took the place of Fords and Sunday afternoon picnics.  Everyone then maintained that there was only a little land as fertile as the fields of Iowa, Illinois and Minnesota, and everyone ought to get his part before it was all goine.  Like gold, it was limited in extent and of great potential value.  Prices skyrocketed from $100 to $250 and $400 per acre without regard to the producing power of the land.

During this period insurance companies were bidding against one another for the privelege of making loans on Iowa farms at $90 or $100 or $150 per acre.  Prices of products were soaring.  Everyone was on the highroad, not only to comfort, but to wealth and luxury.  Second, third and fourth mortgages were considered just as good as government bonds.  Money was easy and every bank was ready and anxious to loan money to any Tom, Dick or Harry on the possibility that he would make enough in these trades to replay the loans almost before the day was over.”

I bet you thought we invented housing bubbles ;-).  But again, the bust didn’t happen instantly.  There were foreclosures in 1929 to be sure, but the wave of property taking occurred primarily in 1931 and 1932. 

Right now the media is starting to warn that there “might” be a real Depression.  But they are quick to say that now isn’t much like 1929 - and we are buying it,  because most people’s relationship to historical events is pretty sketchy - when talking on a long historical scale, the fact unemployment really began to get bad 2 years after the stock market crash is a blurry fact, the difference of a typo in numbers.  Who cares whether it happened in 1930 or 1931, the depression is the depression.  But the thing is, if you were living it, watching things unfold, it looked to people just like it looks to us now - a few steps forward, some good news, a few steps back, a bit of bad news.  And in the interval between one piece of history (the stock market crash) and another (unemployment peaking) were four miserable years of life gradually sliding down.   We understand history in chunks, but we live in history day to day, and everyone who lives in history experiences it that way.  We forget that at our peril. 

Telling us that it isn’t as bad as the mid-point of the depression isn’t just useless, it is misleading, and intentionally so.  Compare the worst to the not so bad, and things don’t look that bad.  But compare where we are now to where we were at a comparable period of the Depression, and things begin to look worse - and more accurate.

I can only hope that Ben Bernanke is a better student than the people who write these articles.  But of course, he has even more incentive to tell us that things aren’t really so bad.

 Sharon

Dissecting the Long Emergency

Sharon March 28th, 2008

If there is one thing Jim Kunstler deserves all the props in the world for, it is his naming and describing the complex, sweeping and all-encompassing crisis we’re facing.  He called the combination of energy, climate and financial crisis “The Long Emergency” and I think that’s turning out to be just about right.  As a prophet, Kunstler is looking pretty accurate in some respects (I’m still kind of skeptical about the Asian pirates marauding across the northwest coast, but maybe I’m wrong ;-).

I’ve been getting emails from people asking me whether the present crisis is “just” financial and whether/how peak oil and climate change are factors.  And this is a fascinating question - because, honestly, it is awfully hard to sort them out.  In fact, it is really all one crisis - I call it (perhaps not as eloquently as Kunstler) the crisis Ourobouros, the great worm that encircles the globe, and does not realize that he is devouring his own tail - it is impossible to entirely find the beginning or end.  But we can take a stab at it.

 I thought for my own edification, and perhaps for others, it might be worth trying to sort out how all three segments of our present situation are working together, and what parts of the hard times facing us are tied into more than one segment of the crisis.  I make no claims that I can provide a perfect explanation, or that I won’t miss some links, but if nothing else, it is an interesting way for me to clarify my own thought.  So I’m going to list present problems one by one, and describe how (if at all) they are tied into each element - financial crisis, climate change, peak oil.  I’ll try and figure out whether what we’re seeing is a cause or effect, and just how closely related they are.  I doubt I’ll even come close to articulating the whole picture - that sounds like a book in itself, and one for someone more knowledgeable than I.  But here goes nothing:

Crisis # 1: Rising Food Prices

Relationship to Climate Change: Super Direct. Climate change is a direct cause of rising food prices, particularly the rise in wheat prices.  Wheat crops were heavily affected by drought in Australia, the Middle East and the Mediterranean.  Aquifer depletion in China, along with reduced rainfall is also affecting wheat crops.  Massive growth in  biofuel production, was in part motivated by the (completely erroneous) assumption that biofuels would produce fewer greenhouse gasses than fossil fuels.  Climate instability is also a primary motivator as nations become more concerned with feeding themselves, and restrain exports or raise tariffs, as when Russia raised wheat tariffs and Egypt and India announced they will largely stop exporting rice.

Relationship to Peak Oil: Super Direct. Peak oil is a direct cause of rising food prices.  Biofuels are only a feasible project in a world of declining oil availability - their Energy Returned over Energy Invested is simply too small to make any sense when you’ve got plenty of oil and natural gas.  The mistaken belief that we can keep all the cars going and our basic lifestyle intact has led to a rush to biofuels that has helped driving prices of staples, meat, eggs, milk and other foods up by 50%. In addition, rising fertilizer prices (because of rising prices for natural gas and rising prices for rock phosphates) are also driving food prices up, as are the costs of transporting industrial food over long distances. 

Relationship to Financial CrisisDirect. The financial crisis is in part a result of rising food prices.  Over this winter, we saw more and more people using their holiday gift cards and store credits for groceries - food prices are rising so quickly that they are cutting heavily into consumer spending, which is a substantial part of the economy.   Food price rises have slightly slowed growth in countries whose wealth has been propping up the US economy. This is somewhat speculative, but rising food prices are probably an underlying force fueling the collapse in housing values - the reality is that basic needs like food and housing must both be met, and when you are paying more for one, you can pay less for another.  I’ve written about the relationship between housing and food prices here.

Crisis #2: The Housing Collapse

Relationship to Climate Change: Tenuous.  So far, sea levels haven’t risen enough, and climate change hasn’t been a large enough factor to really motivate large numbers of people to relocate.  Some farmers in Australia, and a few others are starting to see the writing on the wall, but mass migration in the rich world has not yet affected property values.  So far, people are still looking at any given disaster as short term thing.  I don’t expect that to last.  In the long term, climate change will probably dramatically alter housing patterns, and cause some markets simply to collapse.

Relationship to Peak Oil: Substantive.  I’m going out on a limb here, because I’ve seen no research suggesting this to be true, but while the majority of the housing collapse is based on the fact that we had ridiculously overinflated housing prices to begin with, I think that it is also the case that rising energy prices for home heating, cooling, food and other things have begun to eat into not just people’s ability to pay a large chunk of their income towards a mortgage, but also into their belief in housing as a refuge from difficulty.  It isn’t an accident that the housing boom really took off in the US shortly after 9/11, when people turned inwards, hiding from the outside world. Again,  I’m speculating, but I think the outside world has penetrated, and the idea that a home could be a form of protection is wearing off in the face of skyrocketing costs. Also, as energy prices rise, local governments are less able to maintain services -we have seen this with school bus and plowing declines - and thus become lower value regions, although the latter is a tertiary effect.

Relationship to Financial Collapse: Absolutely Direct.  In this case, it operates as both a cause and an effect.  The housing boom and the use of inflated house values to borrow was the cause of the bubble, and the collapse of housing prices is, if there is a single root cause, the cause of the crisis.  But it is also an effect of drying up credit - the less there is to borrow, the smaller the chance people will buy.    The more foreclosed and devalued properties there are, the less reason to buy a new house.  It is vicious circle, and it looks like it has a lot longer to go.

Crisis #3 - Rising Gas Prices

Relationship to Climate Change: Not Much Yet.  We are going to see a strong relationship in both cause and effect here, but so far, the effect has been small.  So far, the major effects of climate change in oil prices are limited to natural disasters affecting refineries, and growing political conflicts over water that threaten economic relationships.  None of these is terribly acute yet.  However, with discussion of carbon taxes in the works and more and more disasters, water shortages and other problems occurring, we may see supply issues more tied to climate change.  More importantly, gas prices have yet to drive off global demand enough to mitigate climate change.  As prices get higher, more effects should be seen - but probably not enough to mitigate things.

Relationship to Peak Oil: Umm…duh!  Do I really have to explain this one?  Yes, peak oil is the root here.

Relationship to Financial Crisis: Significant, but mostly concealed. Growth requires energy - and quite a lot of it. I won’t go into detail here, since Gail the Actuary has just done a great talk on this subject which you can read here that covers anything I would say better.

Crisis #4 - Failing to Mitigate Climate Change

Relationship to Climate Change: Well, yes.  This one seems like it would be a “duh” but it actually isn’t just that.  Yes, our failure to mitigate climate change is causing climate change.  But we are also failing to mitigate climate change *BECAUSE* of climate change.  That is, the rising number of natural disasters are making us react to climate change more and more, rather than addressing it.  We are spending more and more of our money and energies that we might use to adapt our infrastructure repairing it and fixing the damage of climate change.  Moreover, because climate change is happening much more quickly than anyone expected, we are still basing our mitigation efforts on inadequate information - that is, we’re still talking about 450 or 550 ppm limits, when 350 ppm is probably more like it.  We still don’t get what we even have to do - and that weakens our ability to do it.

Relationship to Peak Oil: Very Direct.  The reality is that all the discussions of what we potentially could do to mitigate climate change depend on large scale economic growth and lots of cheap energy to do the initial build out.  As energy prices rise and shortages start showing up (mostly so far in the Global South, but not entirely), we’re going to use more and more money and energy on mitigation. Diesel supplies, which are required for global trade, build outs, mining and other projects are showing shortages even in the rich world.  Moreover, our warmongering is the direct cause of 10% of all emissions, and that, of course, is about the oil.  James Hansen recently released an analysis suggesting that there isn’t enough oil in the ground to get us to the worst effects of climate change - but that would only work if we didn’t use the coal.  But higher oil and natural gas prices are likely to drive us steadily towards coal.

Relationship to Financial Crisis: Direct.  Despite all the hype, the payback time of most renewable energies is pretty damn long, compared to oil.  So in order to build out renewable energies you lots of liquid credit dripping off the walls and down into various new industries.  We need people who are willing not to get their money back for a good long time.  Guess what - those people are increasingly in short supply.  So expensive, long term renewable solutions are also likely to be in short supply.  On the domestic level, while some energy consumption drop is likely to happen, there are also likely to be short-term losses, for example as people priced out of heating oil in the northeast burn coal, or as people rely on existing gas guzzlers rather than buying more fuel efficient vehicles.  In the long term, a depression will cut consumption, but also adaptation, which will mitigate climate change and increase unhappiness.  Poorer cities and towns will likely end efficiency programs, nations may permit coal plants again to keep the grid going.

Crisis #5 - Increasing World Political Instability

Relationship to Climate Change: Absolutely Direct.  Climate change is likely to be a political disaster - up to 1.5 billion people without access to safe water, some without any water at all.  More than a billion refugees.  Growing hunger.  Political conflict over resources, land and borders of all sorts.  Some of these wars are already popping up - the conflict in the Sudan, for example.  And a fair bit of anger on these issues is likely to be directed (quite correctly) at the Global North, probably especially at the US.  We can also expect more internal conflicts within nations over resources, such as the ones the US is already seeing over water.  Political unrest is also likely to exacerbate climate change, as oil fields and forests are burned in conflicts and the war machine, which already produces 10% of all greenhouse gasses, expands.

Relationship to Peak Oil: Direct…And Getting More So. Well, I won’t belabor Iraq, but that’s probably just the beginning.  For example, Saudi Arabia recently announced it will no longer grow wheat, its primary staple - probably due to climate change.  Rice prices rose by 30% in a single day this week - and almost 2/3 of the world’s population depends on rice as a staple food, in large part due to climate change and biofuel production.  The rising price of corn is already causing tortilla riots, and that’s directly tied to ethanol production. 

Relationship to Financial Crisis: Tenuous…for the Moment. Even if you don’t think that any attack on Iran will be partly motivated by the Republican administration’s desire to distract from the unfolding financial crisis, our political relationship to Russia and China (among others), is clearly being shaped by America’s declining economic situation.  So far things are in the early stages, but it seems like the balance of world power is shifting, and how that will play out, we do not know.  The one good thing one can say about the coming financial crisis is that if the economy crashes enough we will probably leave Iraq fairly quickly.

I’m sure I could come up with a whole host of other crises to discuss, but this at least gets us a start! 

 Shalom,

 Sharon

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